By |Published On: November 19th, 2013|Categories: Research Insights|

Momentum, Value, and Size and Liquidity Factors in the Polish Market

  • Adam Zaremba and Przemyslaw Konieczka
  • A version of the paper can be found here.
  • Want a summary of academic papers with alpha? Check out our free Academic Alpha Database!

Abstract:

The ability to indicate factors which best explains common variation in stock returns, is crucial to construction of a correct pricing model and forecasting equity returns. Taking into account long finance literature, firm characteristics such as market capitalization, book-to-market ration, the short-term history of past returns, or market turnover are important determinants of stock returns. This study seeks to identify factors important for forecasting changes in stock prices in Poland. The paper examines the relationships between common stock returns and four well-recognized factors: size, value, momentum and liquidity. First, we review existing literature in the field. Second, we investigate the relationship between fundamental factors and stock returns in the Polish market. We study also interactions between separate factors. We perform a long/short portfolio analysis based on all stocks listed on the Warsaw Stock Exchange between 2000 and 2012. We find that historically in Poland it was possible to build factor-based portfolios which outperformed the broad market. However, the Polish market seems too young to derive some statistically significant interferences.

Data Sources:

Bloomberg Warsaw Stock Exchange 2000-2012.

Alpha Highlight:

Value works; size works; momentum works.

SSRN-id2349875

The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

Commentary:

  • A robustness test on value/size/momo.
  • Is the sample truly “out of sample?” All equity markets are highly correlated these days…

About the Author: Wesley Gray, PhD

Wesley Gray, PhD
After serving as a Captain in the United States Marine Corps, Dr. Gray earned an MBA and a PhD in finance from the University of Chicago where he studied under Nobel Prize Winner Eugene Fama. Next, Wes took an academic job in his wife’s hometown of Philadelphia and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management firm dedicated to an impact mission of empowering investors through education. He is a contributor to multiple industry publications and regularly speaks to professional investor groups across the country. Wes has published multiple academic papers and four books, including Embedded (Naval Institute Press, 2009), Quantitative Value (Wiley, 2012), DIY Financial Advisor (Wiley, 2015), and Quantitative Momentum (Wiley, 2016). Dr. Gray currently resides in Palmas Del Mar Puerto Rico with his wife and three children. He recently finished the Leadville 100 ultramarathon race and promises to make better life decisions in the future.

Important Disclosures

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Third party information may become outdated or otherwise superseded without notice.  Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency has approved, determined the accuracy, or confirmed the adequacy of this article.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).

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